Los Angeles -- Consumer advocates joined State Senator Martha Escutia to announce the final passage of landmark legislation which will make a low-cost, basic auto insurance policy available to low-income drivers in Los Angeles and San Francisco counties. The Lifeline Auto Insurance Plan was sponsored by the Foundation for Taxpayer and Consumer Rights.

The plan --the first of its kind in the nation -- will make a $450 per year basic auto insurance policy available to low-income, "good" drivers in Los Angeles and a $410 policy available in San Francisco. At the urging of insurance industry lobbyists, legislators imposed a 25% surcharge on unmarried men ages 19-24. The "Lifeline" plan, based on SB 171 (Escutia), will be sent to the Governor this week.

"This marks an historic change for low-income drivers seeking insurance. For the first time, poor Californians will have access to a flat-rate policy that, for many who now drive uninsured, is affordable," said Doug Heller, consumer advocate with FTCR.

In Los Angeles, more than one million motorists drive without insurance and are subject to stiff "mandatory insurance" fines. The Lifeline program will provide low-income drivers an opportunity to comply with the law rather than be forced to drive illegally. Due to high premiums charged in many urban communities -- an average premium for basic liability insurance in South Central Los Angeles is over $1800, according to the California Department of Insurance -- the number of uninsured drivers on the road is greater than the number of insured drivers in many poor communities throughout Los Angeles County.

The final plan, which consumer advocates were able to link to the renewal of the mandatory auto insurance law, is far from the original proposal, according to Harvey Rosenfield, president of the non-profit, non-partisan FTCR and author of California's 1988 insurance reform initiative, Proposition 103. FTCR sponsored the original Lifeline insurance proposal, SB 171 (Escutia) and has worked on the low-cost auto insurance proposal for three years, modeling it after "Lifeline" telephone service provided to low-income consumers. The pilot programs will expire at the end of 2003 unless the legislature renews the law.

"Proposition 103 reformed the insurance system in California by mandating stronger regulation of profits and expenses and prohibiting insurance industry abuses," said Harvey Rosenfield. "The Lifeline legislation was designed to address a distinct problem: millions of Californians cannot afford insurance and end up subject to huge penalties for violating the law. In its current form, SB 171, authored by Senator Martha Escutia, will begin to solve this problem."

According to FTCR, the pilot programs will result in savings of approximately $100-$200 million to insured drivers by lowering uninsured motorist premiums. "When hundreds of thousands of previously uninsured drivers buy the Lifeline policy, we should all expect to pay less for insurance," according to Heller.

Below is an explanation of the Lifeline plan:

Price of Policy (Los Angeles)
$450 per year
$562.50 for unmarried men 19-24 years of age

Price of Policy (San Francisco)
$410 per year
$512.50 for unmarried men 19-24 years of age